NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
DOCKET NO. A-3628-10T2
CHARLES CAMERON and CHRISTINE
CAMERON, his wife, APPROVED FOR PUBLICATION
Plaintiffs-Appellants, March 8, 2012
ROY B. EWING,
Submitted December 7, 2011 - Decided March 8, 2012
Before Judges Axelrad, Sapp-Peterson and
On appeal from the Superior Court of New
Jersey, Law Division, Hunterdon County,
Docket No. L-449-07.
Pellettieri, Rabstein & Altman, attorneys
for appellants (W. Barry Rank, on the
Shimberg & Friel, P.C., attorneys for
respondent Wells Fargo Bank, N.A. (Anne E.
Walters, on the brief).
Respondent Roy B. Ewing has not filed a
The opinion of the court was delivered by
OSTRER, J.S.C. (temporarily assigned).
This appeal presents the novel issue whether the stream of
payments due a homeowner under a home equity conversion
mortgage, also known as a reverse mortgage, is subject to
execution and garnishment for the benefit of judgment creditors
of the homeowner. The trial court determined the payments were
beyond the reach of the judgment creditors, and denied their
motion to compel the mortgagee to comply with a writ of
execution. We reverse, reasoning the mortgagee's obligation to
make monthly payments to defendant, the judgment debtor, is
properly construed to be a "debt" against which plaintiffs, the
judgment creditors, may obtain an order directing execution and
garnishment under N.J.S.A. 2A:17-50 and -63 and Rule 4:59-1(c).
We remand for the court to determine the percentage of the debt
properly subject to execution. N.J.S.A. 2A:17-56.
The facts are undisputed. Plaintiffs filed a complaint in
July 2007 against defendant seeking damages arising out of an
automobile accident. Defendant was an uninsured driver. He
sought a trial de novo after an unfavorable arbitration award,
but the case settled after a pre-trial conference. Defendant
consented to entry of judgment against him for $400,000 on April
Two months before settling the case, defendant entered into
the reverse mortgage with Wells Fargo Bank, N.A. (Wells Fargo).
Defendant, then almost eighty-five years old, gave Wells Fargo,
a mortgage on his Lambertville house in an amount "up to"
$360,000. Although we will analyze the terms of the transaction
in greater detail below, suffice it to say here that Wells Fargo
agreed to pay defendant $959.01 for as long as he lived and
resided in his house.
Plaintiffs discovered the existence of the mortgage in the
course of post-judgment supplementary discovery. Defendant's
other income consisted of monthly Social Security benefits and a
modest Pennsylvania public employee pension. On plaintiffs'
behalf, the Hunterdon County Sheriff served a writ of execution
dated June 1, 2010, on Wells Fargo, levying against "monies due
to defendant from a reverse mortgage from Wells Fargo Home
Mortgage." After Wells Fargo refused to comply, plaintiffs
filed a motion in aid of litigants' rights on November 23,
2010, seeking an order compelling Wells Fargo to withhold the
monies due defendant under the reverse mortgage and pay them
over to the sheriff.
Plaintiffs argued Wells Fargo's obligation to pay defendant
$959 a month was a "debt due," and therefore subject to
garnishment under N.J.S.A. 2A:17-63. Alternatively, plaintiffs
argued they were entitled to an order compelling defendant, as
judgment debtor, to pay over his reverse mortgage receipts in
regular installments, pursuant to N.J.S.A. 2A:17-64. Wells
Fargo argued its monthly payments to defendant should not be
deemed property subject to garnishment under Rule 4:59-1.
In a written decision dated March 4, 2011, the court agreed
the regular payments from Wells Fargo to defendant were not
subject to garnishment under N.J.S.A. 2A:17-63, nor to an order
for installment payments under N.J.S.A. 2A:17-64. The court
reasoned the reverse mortgage payments to defendant were
properly characterized as loans from Wells Fargo to defendant,
secured by the mortgage on the house, and repayable upon
defendant's death or other events described in the transactional
documents. Thus, Wells Fargo was not indebted to defendant;
rather, defendant was indebted to Wells Fargo.
The court rejected plaintiffs' arguments that the reverse
mortgage payments should be subject to execution because it was
simply a means of "freeing up" defendant's interest in the
equity of the home; or, alternatively, the payments were, in
substance, a form of an annuity that should be subject to
execution. The court also held that because Wells Fargo's
payments to defendant were loans subject to repayment, they did
not constitute "income" subject to an installment order under
On appeal, plaintiffs argue:
THE MONTHLY PAYMENTS UNDER THE MORTGAGE
TERMS OF THE REVERSE MORTGAGE ARE SUBJECT TO
A WRIT OF EXECUTION.
PURSUANT TO N.J.S.A. 2A:17-64 THE COURT
SHOULD ORDER THE DEFENDANT TO MAKE MONTHLY
PAYMENTS TO THE PLAINTIFFS.
As this appeal presents an issue of law, our review is de
novo. Manalapan Realty, L.P. v. Manalapan Twp. Comm., 140 N.J.
366, 378 (1995)("A trial court's interpretation of the law and
the legal consequences that flow from established facts are not
entitled to any special deference."). The issue presented is
whether Wells Fargo's monthly payment obligation under the
reverse mortgage constitutes a "debt" subject to execution and
garnishment. To answer this question, we consider the terms of
the reverse mortgage, and then construe the execution statute in
light of relevant case law and governing public policy.
The reverse mortgage transaction is embodied in four
principal documents: Home Equity Conversion Loan Agreement (Loan
Agreement), Adjustable Rate Home Equity Conversion Mortgage
(Mortgage), Home Equity Conversion Mortgage Payment Plan
(Payment Plan), and Note.1 The Mortgage secured repayment of the
debt evidenced by the Note, up to a principal amount of
The note was not included in the record before us.
$360,000, at a variable interest rate initially set at 4.79
percent, subject to a 14.75 percent cap. The rate was expected
to average 5.17 percent according to the Payment Plan.
Pursuant to the Payment Plan, defendant opted to receive,
and Wells Fargo agreed to pay defendant $959 a month during his
tenure in the house. The Payment Plan provided a "Principal
Limit" for those payments of $116,633. Monthly payments under
the "tenure plan" that defendant selected, as opposed to a "term
payment plan," were still based on a projected term, and
provided for monthly payments calculated to equal the Principal
Limit when defendant reached 100 years of age.2 Wells Fargo was
liable for a late charge of ten percent of the monthly payment
if it forwarded it to defendant late. The Loan Agreement
provided that Wells Fargo would withhold from defendant's
monthly payment amounts to cover property taxes and insurance.
In addition to the monthly payments, defendant at closing
received $20,000 as a cash advance, plus retained an additional
line of credit of $15,000. Wells Fargo retained funds to cover
We are unable to reconcile the provision of the "tenure payment
plan" in the Loan Agreement, which apparently provided defendant
payments for almost sixteen years, given his age of 84 years
when he entered the transaction; and the Payment Plan, which set
the monthly payment at a level where he would exceed the
Principal Limit in just over ten years ($116,633/$959=121.6).
However, defendant was permitted to change from the "tenure
payment plan" to the "term payment plan" whenever the Principal
Balance was less than the Principal Limit.
servicing fees, the discharge of liens of almost $26,000, and
closing costs of over $15,000, which included a $4800 fee to the
FHA and a $4400 loan origination fee.
Defendant promised that all funds advanced would be repaid
upon his death.3 He agreed to reside in the house and to
maintain it. Wells Fargo was authorized to accelerate the debt
and require full payment of all funds secured by the Mortgage if
defendant died, no longer lived in the house as his principal
residence, or breached another obligation of the Mortgage. The
payment obligation also ceased if defendant filed a petition in
bankruptcy. The Loan Agreement and Mortgage include severability
clauses, providing that if any provision conflicted with State
or federal law, it shall be severed from the balance of the
agreement which shall be given effect.
The debt secured by the Mortgage is non-recourse. Thus,
defendant has no personal liability for repayment. Wells Fargo
Defendant did not execute a Shared Appreciation Rider, which
would have granted Wells Fargo a partial interest in any
appreciation in the value of defendant's property upon sale.
See 24 C.F.R. 206.23 (under optional shared appreciation
provision, "the mortgagor shall pay an additional amount of
interest equal to a percentage of any net appreciated value of
the property during the life of the mortgage. The percentage of
net appreciated value to be paid to the mortgagee, referred to
as the appreciation margin, shall be no more than twenty-five
percent, subject to an effective interest rate cap of no more
than twenty percent."). We therefore assume defendant retained
sole interest in any appreciation of the property exceeding his
is barred from obtaining a deficiency judgment, and is limited
to enforcing the debt through the sale of the property.
A judgment creditor is entitled to obtain execution against
a debtor's "debts" as well as earned income, trust fund income,
When a judgment has been recovered in
the Superior Court, and where any wages,
debts, earnings, salary, income from trust
funds, or profits are due and owing to the
judgment debtor, or thereafter become due
and owing to him, to the amount of $ 48.00
or more a week, the judgment creditor may,
on notice to the judgment debtor unless the
court otherwise orders, apply to the court
in which the judgment was recovered, or to
the court having jurisdiction of the same,
and upon satisfactory proofs, by affidavit
or otherwise, of such facts, the court shall
grant an order directing that an execution
issue against the wages, debts, earnings,
salary, income from trust funds, or profits
of the judgment debtor.
[N.J.S.A. 2A:17-50 (emphasis added).]
See also R. 4:59-1(d) (regarding "issuance of an execution
against wages, debts, earnings, salary, income from trust funds
or profits") (emphasis added).
In the case of regular, recurring payments, the creditor is
entitled to a garnishment order.
After a levy upon a debt due or
accruing to the judgment debtor from a third
person, herein called the garnishee, the
court may upon notice to the garnishee and
the judgment debtor, and if the garnishee
admits the debt, direct the debt, to an
amount not exceeding the sum sufficient to
satisfy the execution, to be paid to the
officer holding the execution or to the
receiver appointed by the court, either in 1
payment or in installments as the court may
[N.J.S.A. 2A:17-63 (emphasis added).]
Construing the term "debt" in the execution statute, our
former Supreme Court held that "debt" should be accorded not
only its ordinary legal meaning as "an obligation for the
payment of money founded upon a contract, express or implied,"
but more broadly as "that which one person is bound to pay to
another under any form of obligation." Passaic Nat'l Bank &
Trust Co. v. Eelman, 116 N.J.L. 279, 281 (Sup. Ct. 1936).
"Whatever the law enjoins one to pay takes the legal
classification of a debt." Id. at 282. The court in Passaic
Nat'l Bank determined that a "debt" encompassed a municipal
police officer's pension that was not otherwise expressly
exempted from execution.
The court held that "debt" should be interpreted in light
of the Legislature's apparent intent in enacting the law on
execution. The meaning "may be enlarged or restricted to
effectuate the manifest reason and obvious purpose of the law."
Id. at 283. The court concluded that the Legislature intended
to subject to execution not only earned income, but also other
Evidently, the legislative purpose was
to include all obligations that, like wages
and salaries, income from trust funds, and
profits, are payable in periodic
installments or stated sums at not less than
the prescribed minimum rate. It was
patently not the intention to limit the
operation of the statute strictly to
contractual obligations to pay for the
judgment debtor's labor or personal service.
See also T. & C. Leasing, Inc. v. Wachovia Bank, N.A., 421 N.J.
Super. 221, 228 (App. Div. 2011) (stating executions under
N.J.S.A. 2A:17-50 pertain generally to regularly recurring
payments to the judgment debtor).
Consistent with these principles, the monthly reverse
mortgage payments due from Wells Fargo are properly deemed debts
owing to defendant. Federal law defines the Home Equity
Conversion Mortgage to mean "a first mortgage which provides for
future payments to the homeowner based on accumulated equity[.]"
12 U.S.C. § 1715z-20(b)(3). The recognized purpose of the
transaction, reflected by its name, Home Equity Conversion
Mortgage, is "to permit the conversion of a portion of
accumulated home equity into liquid assets[.]" 12 U.S.C. §
1715z-20(a)(1).4 Our state's law authorizing issuance of reverse
mortgages characterizes the payments to the mortgagor as
Regulations governing federally insured Home Equity Conversion
Mortgages are set forth at 24 C.F.R. Part 206.
"income," although it exempts it from taxation as gross income.
N.J.S.A. 46:10B-20. See also Assembly Banking and Insurance
Committee Statement to A.1660 (1979) (stating that reverse
mortgages, as authorized by L. 1979, c. 140, and codified at
N.J.S.A. 46:10B-16 to -21, "permit senior citizens to make use
of the equity which they have built up in their home. . . . The
senior citizen would . . . have his income supplemented while
still being able to live in his home.").5
Although the payments are not earned income, they are a
regular and recurring obligation of Wells Fargo. It is of no
moment that defendant also is indebted to Wells Fargo and he or
his estate is ultimately liable to repay the monies received to
the extent repayment may be generated from sale of the property.
Wells Fargo remains obliged to make periodic installment
payments to defendant pursuant to the terms of its Loan
Agreement and Mortgage.
We recognize that "[a] debt which is uncertain and
contingent, in the sense that it may never become payable, is
not subject to levy and sale." Cohen v. Cohen, 126 N.J.L. 605,
610 (Sup. Ct. 1941) (holding widow's right to collect one third
of death benefit under husband's life insurance policy if she
Although the Legislature expressly provided that reverse
mortgage proceeds were exempt from taxation as gross income,
N.J.S.A. 46:10B-20, the Legislature was silent on whether the
proceeds were exempt from execution or garnishment.
were alive on a date certain in the future was too uncertain and
speculative to be subject to levy and sale under execution law).
However, debts may be subject to execution "if liquidated and
certain in their existence[.]" Canger v. Froysland, 283 N.J.
Super. 615, 621 (Ch. Div. 1994). See also Passaic Nat'l Bank &
Trust Co., supra, 116 N.J.L. at 282 (stating that a debt must be
"for a sum certain, or a sum readily reducible to a certainty,"
that may be payable in a single amount, or in installments). In
this case, Wells Fargo's payment obligation is certain and
Reading "debt" to include Wells Fargo's monthly payment
obligation to defendant is also consistent with the general
policy favoring enforcement of judgments. "It is the general
policy of the law to lend the creditor all reasonable assistance
for the enforcement of his claim, especially against a debtor
who, though possessed of the means to pay, seeks to evade his
obligation." Id. at 286.
Nor is execution barred by defendant's agreement not to
assign his rights under the Loan Agreement and Mortgage.
Execution and garnishment do not depend on defendant personally
assigning his rights. Also, the non-assignment covenant is
ineffective to bar execution and garnishment notwithstanding the
oft-stated general rule that a test of liability to garnishment
or execution "is whether it is the subject of assignment." Id.
at 286. See also Seventy-First Street and Broadway Corp. v.
Thorne, 10 N.J. Misc. 99, 104 (Sup. Ct. 1932)(applying rule to
shield pension payments from garnishment); Sears, Roebuck & Co.
v. Romano, 196 N.J. Super. 229, 236-37 (Law Div. 1984) (applying
rule as alternative basis to shield from execution unexercised
overdraft privileges). But see Otten v. Cavalli, 14 N.J. Misc.
296, 296-97 (C.P. 1936) (distinguishing Seventy-First Street and
Broadway Corp., supra, and Passaic Nat'l Bank & Trust Co.,
supra, stating "it is the inherent nature of the claim itself,
and not any peculiar inter-party restrictions" that governs
whether garnishment is permitted). Absent a statutory exemption
or other clear countervailing public policy, the non-
assignability rule does not extend so far that it shields from
execution and garnishment payments from a source the judgment
We thus treat the non-assignment clause as we have treated
restrictions on alienation in self-settled spendthrift trusts.
"'Where a person creates for his own benefit a trust with a
provision restricting the voluntary or involuntary transfer of
his interest, his transferee or creditors can reach his
interest.'" Aronsohn & Springstead v. Weissman, 230 N.J. Super.
63, 68 (App. Div. 1989) (quoting Restatement (Second) on Trusts,
§ 156(1) (1959)). See also N.J.S.A. 25:2-1(a) (except as
provided, "every conveyance, transfer and assignment of goods,
chattels or things in action, made in trust for the use of the
person making the same, shall be void as against creditors").
In Aronsohn & Springstead, supra, 230 N.J. Super. at 67-68,
we extended that principle to a Keogh account, notwithstanding
the anti-alienation provision of federal law, 26 U.S.C. §
401(a)(13)(A). We found the anti-alienation provision did not
forbid involuntary alienation by execution under state law, as
the provision only provided for negative tax consequences if
alienation occurred. Id. at 67. We are unaware of any federal
or state law or regulation that expressly limits assignment or
execution against the payments under a Home Equity Conversion
Mortgage, nor have the parties cited one to us.
The same public policy that impelled our decision in
Aronsohn & Springstead applies here. Denying plaintiffs relief
would allow defendant to continue to enjoy all the benefits of
owning a home, while placing even the monthly payments generated
thereby beyond the reach of his creditors. "'Creditors of the
sole beneficiary of a self-settled spendthrift trust may satisfy
their claims against the beneficiary . . . because it is against
public policy to permit a person to tie up property in such a
way that he can enjoy it but prevent creditors from reaching
it.'" Id. at 69 (quoting Rayndon & Anderson, "Attachment of
Keogh Plan Assets - A Confusion in the Law and the Courts," 61
Taxes 525, 530-31 (1983)).
While we have found no published opinion specifically
addressing whether a reverse mortgage's payment stream is
subject to execution and garnishment, we find support for our
conclusion in a federal appeals court's decision that a line of
credit is subject to execution on behalf of judgment creditors
once the credit line is exercised. In re Southwestern Glass
Co., 332 F.3d 513, 518 (8th Cir. 2003) (judgment creditor
entitled to writ of garnishment against bank holding proceeds of
advances against judgment debtor's line of credit); cf. Sears,
Roebuck & Co. v. Romano, supra, 196 N.J. Super. at 236
(overdraft privileges not subject to garnishment where no
debtor-creditor relationship had yet been created by a draft on
the account). The monthly payments under defendant's reverse
mortgage has some attributes of an exercised line of credit. Just
as the recipient of a line of credit is indebted to the
financial institution extending it, defendant is indebted to
Wells Fargo as he receives payments, drawing down credit against
his overall payment limit. Nonetheless, the financial
institution that has agreed to provide its customer a line of
credit is obligated to honor drafts against the line, making the
financial institution indebted to its customer, and subjecting
to execution the exercised line of credit. Likewise, the
monthly payments Wells Fargo is obligated to make are subject to
We also find unpersuasive Wells Fargo's argument that its
payment obligation to defendant should not be subject to
execution and garnishment because defendant is obliged to repay
the amounts advanced to him. As we have observed, defendant may
be indebted to Wells Fargo at the same time Wells Fargo is
indebted to defendant. Wells Fargo minimizes the unique
attributes of a reverse mortgage that distinguish it from a
typical loan. Defendant is not personally liable for any
advances. Assuming no breach or relocation from the home, his
repayment obligation arises only after his death. Finally,
Wells Fargo is secured. As federal law states, the transaction
enables an elderly homeowner to convert his or her home equity
into a liquid asset. 12 U.S.C. § 1715z-20(a)(1). It is that
asset that plaintiffs as judgment creditors are entitled to
Although we find that monthly reverse mortgage payments are
subject to execution and garnishment, the court on remand must
determine the percentage of the payments that will be subject to
execution and garnishment, in accordance with the limitations
set forth in N.J.S.A. 2A:17-56. See Zavodnick v. Leven, 340
N.J. Super. 94, 103 (App. Div. 2001).
Turning to plaintiff's alternative request for relief,
N.J.S.A. 2A:17-64 empowers a court to order a judgment debtor
himself or herself "to make payments at stated periods in
installments" from "rights and credits" due the debtor.
If it is made to appear that the
judgment debtor is entitled to, or is in
receipt of, an income or any property or
money or things in action, or rights and
credits, including such income as is derived
from federal, state, county, municipal or
other governmental sources, but not income
or property as is recovered or exempt by
law, the Superior Court may direct the
judgment debtor to make payments at stated
periods in installments, and upon such terms
and conditions as the court may direct, out
of the same, on account of the unsatisfied
[N.J.S.A. 2A:17-64 (emphasis added).]
The trial court determined plaintiffs were not entitled to
relief under N.J.S.A. 2A:17-64 because the reverse mortgage
payments to defendant were not "income" under the statute.
However, as we have decided, the payments are nonetheless debts.
Therefore, they qualify as "rights and credits." See N.J.S.A.
2A:17-57 (defining "rights and credits" to include among other
An order under N.J.S.A. 2A:17-64 is directed at the
judgment debtor. Household Finance Corp. v. Clevenger, 141 N.J.
Super. 53, 55-56 (App. Div. 1976). The remedy pre-existed the
adoption of the statute authorizing garnishment of wages and
debts. Id. at 56. The statutes must nonetheless be read
together. Id. at 57-68. Thus, an order to pay in installments
under N.J.S.A. 2A:17-64 is subject to the percentage limitations
found in N.J.S.A. 2A:17-56. Id. at 58. The court may exercise
its discretion in determining the "terms and conditions"
governing the judgment debtor's installment payment obligation.
Finally, the court may not order both a garnishment order and an
installment order under N.J.S.A. 2A:17-64. Id. at 58. We
presume plaintiffs prefer an order providing for garnishment,
compelling payment by Wells Fargo, to which it is entitled.
Reversed and remanded for further proceedings consistent
with this opinion. We do not retain jurisdiction.